Bankruptcy Judge Shortage Real Possibility If Action Isn’t Taken Soon

It’s an issue that almost no one pays attention to until you need it: the smooth functioning of the bankruptcy system. Though it seldom grabs headlines, it’s important nonetheless. Recent reports reveal that a number of bankruptcy judgeships are in danger of being eliminated, something that could wreak havoc across the country as a limited number of judges are forced to contend with a massive amount of complicated bankruptcy cases.

The issue that has come to a head now has its roots back in 2005. At the time, the number of bankruptcy cases being filed was on a rapid rise and the bankruptcy system was under serious stress. To help alleviate some of the problems, Congress passed a measure that authorized creation of 27 temporary judgeships that were spread across the country’s busiest bankruptcy court districts. Though that was helpful and created a kind of release valve, the problem is that these temporary positions are now set to lapse in late May if no further action is taken.

In some places, especially Delaware, that could be a huge problem. Right now there are six bankruptcy judges in Delaware hearing nearly 3,000 bankruptcy cases each year. Of this number, a growing amount (60 in 2015) are what are known as “mega cases”, meaning they involve more than $100 million in debt or more than 1,000 creditors. The workload is enormous as it is and if the judgeships lapse, it would become impossible. The reason is that of the six current bankruptcy judges, five are “temporary”. This would mean that Delaware, a crucially important bankruptcy district given the number of companies that are headquartered in the state, would be left with one judge to preside over the entire docket. It would be funny if it weren’t so terrible.

The problem is serious enough that it has attracted attention from some influential legislators, including Senator Marco Rubio (several temporary judges are located in Rubio’s Florida). The Senate Judiciary Committee has taken action and has crafted a bill that would make several temporary judgeships permanent, including those in Delaware. Beyond making the temporary positions permanent across the country, the bill would further expand the number of judges, allowing courts to hire four new judges, two of which would be located in Delaware.

Though the plan would certainly help, it needs to be passed by Congress first. That is because the bankruptcy court is part of the U.S. District Courts and is thus funded at the federal, rather than state level. Only Congress can help resolve this issue and some experts are worried about the likelihood of success given recently floated budget proposals. With President Trump making clear he wants big budget cuts across the board, it’s hard to see how the courts could be granted extra money to hire these bankruptcy judges, even if doing so is important. Whether Congress and the President will ultimately be able to forge a deal remains to be seen. You can bet that in the meantime, the one permanent judge in Delaware will be eagerly awaiting word.

If you are contemplating bankruptcy in the Charlotte area, please call the skilled lawyers at Arnold & Smith, PLLC find additional resources here. As professionals who are experienced at handling all kinds of bankruptcy matters, our attorneys will provide you with legally sound advice for your particular situation.